The boss of Lothian buses has warned that there is no guarantee that the council-owned company will provide a £20m contribution to Edinburgh’s planned tram extension.
Answering questions at Edinburgh City Council’s Governance, Risk and Best Value Committee, Richard Hall emphasised that the firm, which is jointly owned by the City Council and the smaller Lothian councils, would have to make investment decisions in its own best interests.
A computer generated image of the planned tram extension
Mr Hall was asked by Labour councillor Gordon Monroe whether he was confident recent investment decisions would not ‘imperil’ the anticipated ‘exceptional dividend’ that the firm is expected to provide to fill a £20m funding gap for the £207m extension of the city’s tram network to Leith and Newhaven.
He said: ‘The payment of base dividend or extraordinary dividend…is not guaranteed. The board has to review that the business trading is significant, that it’s appropriate and that the business is able to continue investing in terms of making sure it sits in the right place in the market. So that’s subject to annual review.
‘So no board, no managing director, no officer of the company can ever guarantee that. We can’t guarantee it because that’s set out in the articles of association that were written by the city some years ago.’
He added: ‘So when we set out our business plan against not only paying our base dividend but the request from the city for an extraordinary dividend, we looked at how we would achieve that And we have to invest in our fleet – it’s critical.
‘We have to invest in our staff – whether that’s in pay or whether that’s in facilities or whatever. We have to invest in our property portfolio to make sure it’s fit for purpose.’
Mr Hall with former transport minister Humza Yousaf
On the issue of moving towards low-emission buses, Mr Hall said, the issue was that ‘the technology is not mature’.
He said: ‘The board has to be very cognisant that when they are making investment decisions they are making the right decisions. We’ve dipped our toe into the water with some electric vehicles to try to understand the technologies.’
He cited the example of the Chinese city of Shenzen, which converted to electric buses in three years but needed twice as many buses for the same coverage.
He said: ‘An electric bus today will cost approximately 100% more than a diesel bus. So, that return and how do you generate the revenues and we’re a commercially generated company; we don’t receive any subsidies from the city.
We receive some subsidy from the Scottish Government…but if we are going to increase the investment levels on products, there’s only one way we can get that – through the farebox.’
He concluded: ‘We’re making the best value decisions going forward.’